June 23, 2003
What Did Eisenhower Mean When He Warned of a Military Industrial Complex? Take a Look at the Carlyle Group.
A BUZZFLASH INTERVIEW
With Dan Briody, Author of "The Iron Triangle: Inside the Secret World of the Carlyle Group"
They are at the epicenter of the military-industrial-complex-Bush-Cheney-crony-capitalism administration. The Carlyle Group is the model example of the nearly seamless connection between the Bush administration, self-enrichment and companies who receive big government defense contracts.
The roster of Carlyle consultants reads like a whos who guide to government officials of the 1980s, starting with former president George Bush, former secretary of state James Baker, and former defense secretary Frank Carlucci.
The most chilling aspect of Briodys book is that the political connections and lobbying activities he unmasks are not illegal.
It is a testament to the brain dead mainstream media that the relationship between the Carlyle group and the Bush-Cheney cartel is not a national scandal.
Brady is an award winning journalist who has written for Forbes, Wired, Red Herring and the Industry Standard.
You can purchase his book as a BuzzFlash premium at: "The Iron Triangle:Inside the Secret World of the Carlyle Group."
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BUZZFLASH: If we were looking at the Carlyle Group -- aside from its controversial nature and the political world of who runs it and the consultants affiliated with it -- what business model does it represent?
BRIODY: Its whats known as a private equity firm. And thats a very vague term to describe a whole umbrella of different types of companies. What Carlyle specializes in is buyouts, which means that they operate very similar to a mutual fund. Only instead of buying and selling stock, they buy and sell private companies. And they also do venture capital and real estate. So theyre in a variety of different kind of financial transactions-based businesses. But their bread and butter is buyouts. And within that area, they focus heavily on government-regulated industries anything that depends very heavily on policymaking and legislation coming out of Washington, D.C. As such, they hire a number of ex-politicians to help them in that regard.
BUZZFLASH: In terms of companies that they buy out, most notably in terms of their political-business crossover, theyre probably most known for their relationship to the defense industry, even though thats not by any means exclusively what they do.
BRIODY: They got their start in the defense buyout business. They struggled for the first couple of years before they hired Frank Carlucci, who was the outgoing Secretary of Defense from the Reagan administration. And Carlucci brought them in the direction of defense buyouts in the late 80s, early 90s, in between the Cold War and the Gulf War, when defense properties were undervalued. And the company struck gold a couple times in that business and was able to build a very healthy buyout practice on the back of these defense LBOs, or leveraged buyouts.
From there, they have diversified over the ensuing 10-12 years, into everything from healthcare to telecommunications, to aerospace and others. But defense is still the cornerstone of their practice. And when people think of the Carlyle Group, the first thing they think of is defense.
BUZZFLASH: On the cover jacket of your book, it says that the book will provide witness to how the Carlyle Group profited from the Sept. 11 terrorist attacks and continues to profit from the ongoing war on terrorism. What evidence do you provide for that?
BRIODY: There are a number of transactions that the company profited from directly following the Sept. 11 attacks. The most important one was the fact that they were able to take United Defense, their crown jewel of defense holdings public shortly after the attacks. In fact, in the prospectus that they circulated, before that IPO, they cited the Sept. 11 attacks as one of the reasons why they were able to sell public stock in this company at this time. So that was all on the back of the defense build-up following Sept. 11.
There are also a number of other holdings of theirs -- like at that time, they owned a company called the IT Group, which is a company that cleans up hazardous materials and won a very lucrative contract to clean up the Hart Senate Building in Washington, D.C., which had been tainted by anthrax.
They also own a company called U.S. Investigative Services, USIS, which is a company that does background checks and provides varying levels of security clearance for different government employees, airline employees things like that. Obviously their contracts went through the roof after Sept. 11.
In addition to that, they own companies that do all kinds of security, different aerospace companies. So whenever theres a big defense buildup, those companies profit. So there are a number of ways that theyve profited very handsomely from Sept. 11.
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BUZZFLASH: I recall that reading in the British papers that Tony Blair was considering privatizing a portion of the intelligence apparatus in Britain, and that the Carlyle Group was going to be subcontracted to do some of that.
DAN BRIODY: He did, in fact. The new company is called Qinetiq. Its spelled Q-I-N-E-T-I-Q. Its the research arm of the ministry of defense in the U.K., which is essentially equivalent to DARPA [the Defense Advanced Research Projects Agency] here in the U.S. And the Carlyle Group was part of that transaction, so they own part of Qinetiq. It was a very controversial transaction in the U.K., obviously. I mean, if you could try to imagine a foreign company coming in and buying DARPA from the United States. Its unimaginable. And particularly a company thats so stockpiled with very powerful former politicians.
BUZZFLASH: So Tony Blair essentially condoned the privatization of a large section of the British defense intelligence apparatus to the Carlyle Group. It would be comparable for us to subcontract that to a foreign company.
BRIODY: Yes, which I dont think would ever happen.
BUZZFLASH: You mentioned in another interview that we heard I believe it was on NPR, Terry Gross that your book doesnt detail illegal activity of the Carlyle Group. And whether that exists or not, you dont know. But it details the legal activity, which is, to you, probably the more worrisome issue that all of this is legal. By that, do you mean the seamless relationship between the private military sector and the governmental military sector?
BRIODY: Thats exactly what I mean. The book opens up with a mention of Dwight Eisenhowers farewell speech, in which he warned the country against the formation of this military-industrial complex. And I think that that is exactly what were seeing today. Were seeing a very tight-knit group of companies and private military contractors that are virtually indistinguishable from various administrations and the political infrastructure of Washington, D.C. so much so that its not clear whose interests were acting on when we go to war.
BUZZFLASH: And now we see the extension in the case of Britain, to the British defense intelligence industry.
BRIODY: Right. And were also seeing Carlyle expand into Italy. They just bought part of Fiats aerospace division, which was a state-controlled Italian military agency. And they are also in the running to buy out DaimlerChryslers aerospace division in Germany. So were seeing a real broadening of the military activity around the Carlyle Group, so much so thats becoming more than just a domestic concern here its becoming an international concern.
BUZZFLASH: Now Carlyle is correct me if Im wrong a holding company. Is it publicly traded?
BRIODY: It is not publicly traded.
BUZZFLASH: So its a limited partnership?
BRIODY: Yes. Its a limited partnership. And as such, its under no obligation to release any of its financial data. So its very difficult for the average citizen to find out what the holdings of this company are and where the conflicts of interest might be. You may have noticed that they "opened up" their website recently because they were receiving a lot of criticism for being secretive and closed up. But theyre still controlling what information theyre putting on that website, so its not like were getting a look under the hood, so to speak, of this company. And theyll never go public. They would never do that.
BUZZFLASH: Now probably the most controversial relationship is the relationship of former President Bush to the company. As you point out, so many of the members of the cast of characters in the Carlyle Group have been associated with past administrations, particularly Reagan and Bushs. Former President Bush has probably the highest profile relationship. What is his relationship to the Carlyle Group, and what has he been used for?
BRIODY: George Bush Sr. is a senior advisor to the company -- again, an ambiguous term -- but essentially his role is to travel abroad and meet with foreign business leaders and foreign heads of state, give speeches on behalf of the Carlyle Group, and pack the house full of wealthy investors who will contribute to Carlyles buyout fund. And also he has had his hand in a number of deals for Carlyle. He has worked closely with business leaders in South Korea and in Saudi Arabia. Hes very close with the bin Laden family. Hes close with the royal family in Saudi Arabia. So hes been very, very involved and a very effective business partner for the Carlyle Group for a number of years now.
BUZZFLASH: Is there cause to be concerned? Some people who cover Carlyle also mention that one shouldnt solely focus on him, because he sort of jumps in and out. Its more the day-to-day people who cross back and forth between their relationships with government officials and the private industry the military-industrial complex, if you will, as Eisenhower called it. But former President Bush is the most visible symbol. Do you have any speculation on how that might impact foreign policy, since hes the father of the current president?
BRIODY: There have been numerous reports that have been widely circulated, and not disputed, by the New York Times, Wall Street Journal, of how the father of the president is advising his son on foreign policy. Certainly in the first year, he was very active in advising his son on policy toward Korea and toward Saudi Arabia. And in both cases, he stepped in and placed phone calls himself to the leaders of those nations to try to smooth things over for his son, who was struggling a little bit in the early going, in dealing with some of those more sensitive areas. So I think that the impact of the father on the son in foreign policy has been very significant and very inappropriate, given the investments of George Bush Sr.s company in both regions in both the Korean peninsula and in Saudi Arabia.
BUZZFLASH: On pages 144 to 146, you discuss a little bit of the relationship between Carlyle and the bin Laden family. Can you just mention that in passing, and what that relationship was and perhaps is now?
BRIODY: The Carlyle Group started working in Saudi Arabia in the early 90s through a Saudi prince, who is one of the biggest foreign investors here in the United States. And through that relationship, they started expanding their business in Saudi Arabia very significantly. One of the most important investors that they found in the kingdom was the bin Laden family, which, of course, owns the Saudi Binladin Group. It's about a $5 billion construction company -- extremely wealthy family, extremely successful company, and who officially disavowed Osama bin Laden back in the early 90s.
So they had been doing business with the bin Laden family for, give or take, five or six years, when Sept. 11 happened. And suddenly, Osama bin Laden became public enemy number one. He was on the cover of all the newspapers. And it came to light that this company that was employing George Bush Sr. counted the bin Laden family among their investors. And they had to divest themselves from that relationship because of the criticism.
BUZZFLASH: And although you dont mention it, there are those, including author Greg Palast, who have claimed that the Bush administration ferreted out members of the bin Laden family on special planes after Sept. 11. But again, thats not a part of whats in your book, but were just pointing that out.
Lets look at United Defense as one example of the relationship between the private industry, the defense industry, and, in this case, its a publicly held company owned by the privately held Carlyle Group. Is that correct?
BRIODY: Thats right. And they own 50% of it.
BUZZFLASH: And what is United Defense? Maybe you can give us as a case study of the interrelationship between a company that has an umbilical cord to the U.S. government, about how a company like that is never a loser.
BRIODY: United Defense is a classic military contractor. They make guns and gun systems, large Howitzer-type, mobile Howitzers. They make the Bradley fighting vehicles and the Paladin gun systems that weve seen a lot of on TV, especially during the Iraqi war. They are one of the largest defense contractors to the Army in the nation. And the Carlyle Group has owned this company since 1997.
When they bought the company, there was a gun program that was the future of United Defense. It was a gun called the Crusader. It was essentially a next-generation Paladin gun system a very large, mobile Howitzer. It looks like tank, but its essentially an enormous gun. And the Crusader was heavily criticized by a national defense panel that was put together to assess the military requirements going forward. It was called too heavy, too slow a Cold War relic. And it was on the chopping block for years after that. But the Carlyle Group was able to mount a very successful campaign by using strategically placed lobbyists, by extending their personal relationships with folks in the Pentagon and in Washington, and by waging essentially a public relations campaign for the gun, and they kept it alive through successive rounds of defense budget cuts miraculously.
No one could believe that this gun had survived as long as it did. And then finally after Sept. 11, when all ships were sort of, you know, rising on the tide of defense spending, they were able to take United Defense public, make hundreds of millions of dollars off of that IPO, only to then finally have the Crusader program cancelled in a very public fashion by Donald Rumsfeld in an announcement. But of course, behind the scenes, what the public didnt see was that United Defense was awarded a brand-new contract for a brand-new gun that very same day that the Crusader program was cancelled. In fact, the press release that United Defense put out about it had the announcement of the new contract in it as well.
BUZZFLASH: So they were essentially held harmless.
BRIODY: Yes, exactly.
BUZZFLASH: Perhaps this is more of a comment, but we found it not-so-curious that after the controversial visit of Bush to the U.S.S. Abraham in the flight suit, that he returned to California from 30 miles offshore and gave a speech at, of all places, the United Defense plant. Do you have any thoughts there about the fact the President of the United States is speaking at a plant that is 50% owned by a company that his father is a consultant with?
BRIODY: I think its brazen, and I think its shameless. And I think that that will go down as a hallmark of this administration. We have seen an absolute affinity for mixing business and politics, and throw in a war and youve got the Bush administration. And that scene of him giving that speech at United Defenses plant in Santa Clara summed up perfectly what this administration is all about.
BUZZFLASH: So all the interconnections were right there -- he was boosting the war effort, talking about keeping the country secure, which meant, in this case, he was praising the employees of United Defense, who, in essence, are employees, in part, of the Carlyle Group, with which his father is affiliated.
BRIODY: He was doing it all. He was pitching a tax cut for the very wealthy while doing an advertisement for his fathers company, and professing the war to be over, and kicking off his reelection campaign, all in one fell swoop. It was an amazing achievement.
BUZZFLASH: And yet for all these connections, I did not see any of them in the press. I only made them because of your book, and knowing about the Carlyle Group, and just going back and confirming that United Defense was, in essence, a company that the Carlyle Group had ownership of.
BRIODY: It was missed by most of the mainstream media, and that was very disappointing. But The Nation picked up on it, thank God.
BUZZFLASH: Going in another direction, you detail how the firm, when it was opened in 1987, picked the name, the Carlyle Group.
BRIODY: Well, the co-founders, David Rubenstein and Stephen Norris, were, at the time, meeting frequently at this hotel on the Upper East Side of New York called the Carlyle Hotel. And the Carlyle was very, very, very opulent and its a very swanky establishment. Its a beautiful hotel. And these guys were looking for a name that gave them a sense of legitimacy and credibility in the industry. They wanted something that was a little blue-blood, or, as Steve Norris put it, gave them a silk-stocking air. And so they thought that the Carlyle Group was the right way to go. And certainly it does have that blue-blood, old money kind of feel to it, even though its only 15 years old.
BUZZFLASH: Your book about the Carlyle Group, subtitled Inside the Secret World of Carlyle Group, is called The Iron Triangle. Why did you choose that title?
BRIODY: Well, the iron triangle is the euphemism that is employed in a number of different areas. But among the areas that its employed is this confluence of business and politics that Eisenhower was talking about when he referred to the military-industrial complex. This is a combination of power and influence that is very dangerous and can result in foreign policy decisions that are based solely on monetary concerns of very few people. And thats what I think weve found here today.
BUZZFLASH: Recently weve read that the Carlyle Group is starting to dabble into media acquisition. Is that right? And if so, should we be worried about that?
BRIODY: Yes, they have picked up a couple media companies. They, for a while now, have owned a very popular publication called Le Figaro in France, and they have been expanding their media acquisitions. And I definitely think this is something that we should be concerned about. I mean, anytime you see a company that has this much political clout -- and obviously has a political agenda -- picking up media properties, youve got to be concerned, especially with the action that the FCC has taken so far this year. Were looking at the potential for having a real controlling influence in the media. And I personally would not like to see Carlyle Group controlling the information that I receive on a daily basis.
A BUZZFLASH INTERVIEW
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a Copy of: "The
Iron Triangle: Inside the Secret World of the Carlyle Group"
otherwise noted, all original